What are the risks of not adapting your supply chain to climate change?

Failing to adapt supply chains to climate change risks disruptions from extreme weather events. Floods, storms, droughts, and heatwaves can damage facilities, delay production and shipments, and cut off access to raw materials. Lack of resilience planning leaves companies unable to maintain operations through climate disruptions, resulting in shortages, quality issues, and inability to meet customer demand. Building climate resilience across the value chain through flexibility measures, scenario planning, and transparency is key to avoiding major interruptions and delays.

Not adapting your supply chain to climate change poses significant risks, particularly in increased operational disruptions. These disruptions can range from severe weather events to geopolitical tensions heightened by resource scarcity. Such events often lead to critical supply chain interruptions, causing delays, material shortages, and in extreme cases, a complete halt in operations. This not only affects immediate business continuity but also damages long-term reputation and financial stability.

Not adapting your supply chain to climate change increases the risk of disruptions from events like natural disasters or extreme weather. This can lead to delays, shortages, and quality issues, impacting operations and profitability. Mitigate these risks by assessing exposure to climate hazards, and implementing contingency plans, backup suppliers, alternative routes, and inventory buffers.

Ignoring the need to adapt your supply chain to climate change comes with a wide range of risks, spanning from the immediate and tangible to the long-term and strategic. Disruptions and Delays: ? Extreme weather events: Floods, heatwaves, and other climate-related disasters can disrupt transportation routes, damage infrastructure, and lead to production slowdowns/complete shutdowns. ? Resource scarcity: Changes in water availability, agricultural yields and raw material extraction due to climate change can lead to shortages and price fluctuations, impacting production and delivery schedules ? Policy and regulation: Governments are increasingly implementing policies to address climate change, such as carbon taxes and emission regulations.

A supply chain has to focus on reliability, on resilience, and on efficiency. And if our supply chains are not aligned with the latest climate data, they will be left behind with large disruptions, and greater issues for the company and/or industry. Disruptions in supply chain due to the increasing effect of the climate crisis are now near inevitable, and so our supply chains have to be able to adapt (to both major and minor, long and short term disruptions) to survive. We do not know what and how a changing planet will affect each area, so keeping on top of the latest news, the latest projections is vital. For example, some food production may need to move away from equatorial regions to seasonal productions in currently cooler climates.

You just to have a look at the growth of voluntary and mandatory carbon prices, taxes, and "cap and trade" schemes globally, like the EU Emission Trading Scheme. Even, the US EPA recently announced that they will be using a price of $190 per metric tonne of carbon dioxide equivalent (MTCO2e) moving forward. When these costs are factored in, companies in carbon intensive industries will be forced to become more efficient, or pass these costs on to their customers. Therefore, it is vitally important that companies start factoring in these costs and begin to reduce their exposure where possible in their supply chain. The longer this is left, the harder it will become. History has taught us that...

Failing to adapt supply chains to climate change brings major financial risk. Disruptions from extreme weather can require costly repairs, lead to missed revenue from delays, increase procurement costs from shortages, and incur penalties from breached contracts. Proactive investments in resilience planning, flexibility measures, and transparency provide positive ROI by minimizing revenue losses. Climate change makes historical data unreliable, so scenario modeling helps anticipate future cost impacts. Adapting supply chains now reduces costs as climate change accelerates.

Failure to adapt your supply chain to climate change raises the risk of increased costs, including higher energy, transportation, insurance, tax, and compliance costs. Mitigate these risks by monitoring and reducing the carbon footprint, implementing efficiency measures, adopting renewables, practicing circular economy principles, and exploring carbon offsetting.

On top of the costs of energy prices, transportation, insurance, taxes and others, is the changing demands of the customers. There has never been a deeper understanding of the climate crisis in the general public than there is right now. If you do not get ahead of the curve on making your supply chain sustainable, you will face much more heavy costs in catching up when the industry gets there ahead of you. When sustainability becomes the norm, you cannot afford to be left behind.

Regulations aimed at reducing carbon emissions could introduce new costs, such as carbon pricing impacting fuel and energy expenses. To mitigate these risks, companies should focus on enhancing the efficiency of their supply chains, utilizing sustainable materials, and exploring renewable energy options. Adopting a more sustainable approach can not only help in controlling costs but also align with the global shift towards environmental responsibility, potentially offering a competitive advantage in an increasingly eco-conscious market.

Scope 3 carbon emissions reporting is set to become mandatory over the next few years. If you are not engaged with this early and proactively measuring and reporting your emissions, you may find you lose business as companies assess the emissions in their supply chain and start switching to drive reductions.

Lack of climate resilience in supply chains increasingly poses regulatory and legal risks. Governments are enacting laws requiring climate risk disclosure and due diligence across value chains. Investors are demanding transparency through initiatives like CDP. Litigation linking company activities to climate impacts is growing. Failure to assess and adapt to climate change can result in noncompliance fines, revoked licenses, debarment from public procurement, and vulnerability to lawsuits. Proactively building climate resilience enables compliance, demonstrates due diligence, and reduces liability. Climate regulation and litigation will accelerate, making resilience planning imperative for regulatory compliance and risk reduction.

Failing to adapt your supply chain to climate change risks being affected by changing regulations, including emission targets and environmental reporting. Stay informed, engage with authorities, and align your strategy with current and anticipated regulatory expectations to mitigate these risks.

As information changes, governments will change, and regulations will change with them. The perfect example of this is with every yearly COP we see changes that we would never have dreamed of the previous year put into action such as the "phasing out" of fossil fuels in 2023. We are soon going to see the voluntary sign-ups of today, soon being written into law and mandated, for example with releasing Ozone depleting chemicals, Greenhouse Gases emissions or soon micro-plastic waste production. On top of this, regulations are currently not on schedule to meet climate targets, so we must expect the tightening of these laws.

Risk if being ripped off by criminally abusive frauds & societal addiction to life shortening technologies again. Also the risk of the complete sterilisation of female foetuses within the first 8 weeks of existence. What is the life of consecutive generations of people worth to your failing & dysfunctional "organisations"?

I already see much pressure from customers, especially in the B2B space as your Scope 1 & 2 emissions are their Scope 3 emissions. As many big companies with high Scope 3 emissions like the automotive industry set themselves ambitious net-zero targets, this will create immense downward pressure on their supply chains and the often smaller companies supplying them. Waiting to do proper accounting will put these companies in a very hard position later on. First movers will win market share.

Failure to adapt supply chains to climate change can seriously impact customer relations and retention. Disruptions that cause delayed or cancelled orders will frustrate buyers. Lack of transparency around climate vulnerabilities erodes customer trust. As climate awareness grows,customers will increasingly select suppliers with resilient and sustainable practices. Proactively communicating resilience efforts improves reputation. Collaborating with customers on solutions like flexibility contracts demonstrates commitment. Climate disruptions that ripple through networks can permanently alter markets. Building resilient supply chains is necessary to retain customers,ensure continuity of services, and remain competitive as the climate changes.

adapting to climate change. Implement sustainable practices, offer eco-friendly products, and enhance transparency in your supply chain to meet shifting customer preferences and expectations.

Customers are becoming more, and more informed about climate issues; this is either a dire threat or an amazing opportunity depending on your viewpoint. These can be seen with rises of products of e-scooter rental companies over taxi firms, or sales of eco-first companies such as recycled loo paper with fully recyclable packaging. We are starting to wake up in our millions. Transparency, and tangible actions are the key to winning this new emerging sector of the industry.

'Slow Food' movement in Italy, emphasizing locally sourced, sustainable agriculture, reflects this shift. This movement encourages consumers to consider the origins and production methods of their food, promoting environmental and social responsibility. To address these changing preferences, businesses must adapt their supply chains to be more transparent and sustainable, actively engaging in practices that reduce environmental impact.

Failing to adapt supply chains to climate change squanders opportunities for innovative solutions: renewable energy, microgrids, nature-based design, predictive analytics, flexible transportation, traceability tools, and more. Resting on existing practices leaves companies unprepared for accelerating impacts. Building a culture of innovation and collaboration creates resilience, competitive advantage, and rapid responsiveness as markets shift. Adaptation spurs necessity-driven innovation critical to long-term viability.

Companies like Enel, an Italian multinational energy company, have significantly invested in renewable energy sources and smart grid technologies. By pioneering in sustainable energy solutions, Enel has positioned itself as a leader in the energy sector, capitalizing on the growing demand for clean energy. To maintain competitiveness, it's crucial for businesses to foster an innovative mindset in their supply chain operations, actively seek collaborative efforts with partners, and engage in sustainable practices.

To solve a problem, first you have to identify that there is a problem. If your supply chain is rigid, you miss the opportunities that are plentiful with proper innovation. We need to have innovation central to our supply chain to be able to see the newest products, to see the best transport methods, and to push for change where change is possible. The climate crisis is changing everything, we either adapt and innovate in the new spaces, or we are left behind.

Companies like Tesla, who innovate in battery technology and production models, lead their markets. To mitigate this risk, fostering a culture of creativity and collaboration in the supply chain is crucial. This helps in co-creating low-carbon and circular economy solutions, essential for long-term viability.

Investors & stakeholders are increasingly scrutinising companies' environmental practices. Supply chains that do not adapt to climate change risk alienating these important groups. In several of my consulting roles, I've advised companies on aligning their supply chain strategies with environmental concerns to maintain positive relationships with stakeholders & investors Non-adaptive supply chains contribute to resource depletion & environmental degradation. My experience in the manufacturing sector showed that unsustainable supply chain practices not only depleted local resources but also led to environmental harm, which could have long-term implications for business continuity

Realmente no existe opción. No creo que sea una posibilidad si es que de verdad creemos en la viabilidad de nuestra propia organización. El Scope 3 es la vía de fuga de emisiones más importante para cualquier organización. No habrá cliente (más o menos grande) que soporte una cadena de valor sin descarbonizar. Es más, creo sinceramente que a corto y medio plazo faltarán empresas de consultoría que ayuden a realizar este viaje junto con las empresas (que formen parte de una cadena de valor relevante para un tercero) que deciden descarbonizarse.

#supplierengagement will be essential to ensure meaningful #collaboration in order to secure reliable and sustainable supply. Supplier Engagement (SE) is a discipline in its own right, too often neglected. And confused with SRM (Supplier Relationship Management). SRM is about strategic relationships with key suppliers. It can be extremely powerful. But SE is about engaging ALL suppliers in your #ESG and #responsiblesourcing commitments. It is more than policy and communication. It is essential to include education, resources and address the intrinsic motivation of suppliers to work with you for mutual success. That includes remedial actions such as investment in #regenerative best practices to #mitigate the risks from climate change.